Market sentiment is at its most bearish level in 9+ months. AAII bears just hit 54 for first time since May 2025. Sentiment isn’t a timing tool, but it can act as a contrarian signal for medium to long term investors. Six months later, S&P 500 $SPX was positive 7 of 8 times.

Huge inflection point today. Major stock indices $SPY, $QQQ, $IWM and $DIA all gained 2%+ while oil $USO fell over 1%. Similar setups showed up before major drawdowns in 2008, 2018 and 2022. But 2020 was the exception and markets bottomed just 4 days after first such move.

Today, S&P 500 $SPX is set to close negative in first quarter of 2026, a midterm year. Negative Q1s in midterm years have been tough for the rest of the year. Full year was positive 3 of 11 times, and average return was -8.7%. Average price path shows a bottom around day 200.

S&P 500 is below its 200DMA. But… Since 1950, this is only the 12th time $SPX has been within 6% of its all time high when the breach happened. On average, it took 275 trading days to make a new high. In 2015, it took 254 days. In 2007, it took 1,000+ days.

0% of S&P Financials are above their 50-day EMA. Yes, zero. This has only occurred near end of major drawdowns in 2018, 2020, and 2022. Each of the three times, S&P 500 $SPX was higher over next 2 months and delivered double digit gains over the next 12 months.

Dow hit 50,000. But $DJI has also been negative in 8 of the last 10 weeks. This streak is rare. All Prior instances followed major S&P 500 $SPX drawdowns. S&P 500 ended negative in all the years: 2022: -19% 2008: -38% 2002: -23% 2001: -13% 2026: ???

$VIX is currently above 30. A close here would mark the first such instance in over 10 months. 5 days later, S&P 500 $SPX was higher 9/10 times with an average gain of 3.1%. But we would be cautious about buying the dip for now. The market is currently driven by headlines.